ACH Glossary

• ACH
• ACH Association
• Addenda Record
• Authorization
• Cash Concentration
• Check 21
• Check Truncation
• Corporate Payments
• Direct Deposit
• Direct Payment:
• Electronic Funds Transfer (EFT)
• Effective/Settlement Date
• Electronic Check Re-presentment
• Image Replacement Document (IRD)
• Lockbox Check Truncation
• National Automated Clearing House Association (NACHA)
• Non-recurring Payment Authorization
• Notification of Change (NOC)
• NSF Check
• One-time Payment Authorization
• Original Entry
• Originating Depository Financial Institution (ODFI)
• Originator
• Point of Sale (POS)
• Pre-Notification (Pre-Note)
• Recurring Payment Authorization
• Receiver
• Receiving Depository Financial Institution (RDFI)
• Remote Deposit
• Return Entry
• Third Party Processor
• Truncation

ACH:

The Automated Clearing House (ACH) is an electronic payment network that exchanges funds electronically throughout the United States.

ACH Association:

Nineteen regional ACH associations provide rules support and payments training to member financial institutions and affiliates (e.g., software vendors, consultants, etc.). In addition, the regional associations work with NACHA and their members to manage risk in the ACH network.

Addenda Record:

A record of additional information that can be attached to an ACH file (e.g., EDI messages, change and return information).

Authorization:

A consumer or company must authorize an ACH transaction in writing. The three types of authorizations are: recurring, non-recurring, and one-time authorizations. Most authorizations must be kept for two years.

Cash Concentration:

Companies with a decentralized corporate structure use the ACH to concentrate their cash into a centralized bank account.

Check 21:

Paper checks deposited under Check 21 rules are processed through the banking system as electronic data and images.

Check Truncation:

Turning a paper check into an electronic item at the Point of Sale (POS or POP) or at a lockbox.

Corporate Payments:

The collection and disbursement of business-to-business funds via the ACH network. The Federal government is mandating this form of payment for corporate taxes and payments to government vendors.

Direct Deposit:

The disbursement of funds to consumer accounts via the ACH. Direct Deposit includes payroll, interest, trust disbursements, expense payments, dividends, pension payments, etc. This is the most widely used ACH service.

Direct Payment:

The collection of funds from consumer or business accounts via the ACH. Direct Payment is used for rent or mortgage payments, utility bills, membership dues, and other periodic payments.

Electronic Funds Transfer (EFT):

The transfer of funds from one bank account to another bank account using the ACH network.

Effective/Settlement Date:

The date an ACH Originator enters on an ACH file to indicate the date they intend the transactions to post (the effective date) and the date entries actually settle through the ACH Operator (the settlement date).

Electronic Check Re-presentment:

The electronic re-presentment of a returned NSF paper check via the ACH network. Re-presented checks can be collected electronically, provided guidelines are followed.

Image Replacement Document (IRD):

A check printed from an electronic data and image file. An IRD is considered a legal replacement for the original paper check.

Lockbox Check Truncation:

Also called Accounts Receivable Conversion (ARC). ARC is the process of a company turning checks received by mail into ACH transactions.

National Automated Clearing House Association (NACHA):

NACHA is the rules-making body of the ACH. It is also the cooperative governing body for the regional ACH associations.

Non-recurring Payment Authorization:

An individual or company authorizes the debit of an account for a varying period and/or amount. Notification must be made 10 days before the effective date with the amount to be debited.

Notification of Change (NOC):

An advice from an RDFI to an ODFI that identifies information in an ACH entry that requires correction.

NSF Check:

A paper check that has been returned due to non-sufficient funds. NSF Checks can be electronically re-presented through the ACH using electronic check re-presentment.

One-time Payment Authorization:

An individual or company authorizes a one-time debit of their account. The authorization is generally written; however a recorded telephonic authorization may be used.

Original Entry:

An ACH debit or credit transaction directed to an account at a RDFI.

Originating Depository Financial Institution (ODFI):

The financial institution that initiates a funds transfer through the ACH network for an originator.

Originator:

An individual or company that initiates an ACH transaction.

Point of Sale (POS):

A term used to describe an ACH transaction at the time of purchase (e.g., at the supermarket checkout counter) initiated using a merchant-issued access device (i.e., a card).

Pre-Notification (Pre-Note): ?

A zero dollar entry sent to the RDFI prior to the first live entry to test account information and notify the RDFI of future payments. Pre-notes are optional.

Recurring Payment Authorization:

The authorization made by an individual or a company of a periodic debit for the same period and the same amount.

Receiver:

The individual or an organization that holds an account to which an authorized ACH entry is sent.

Receiving Depository Financial Institution (RDFI):

The financial institution that receives authorized ACH entries from an ACH operator and posts the entries to a customer’s account.

Remote Deposit:

A web-based check conversion system that enables banks and merchants to deposit from their back office. Checks are converted using a web-based check imager connected to a PC.

Return Entry:

The return of an original entry that either could not be posted or was not able to be posted by the RDFI due to a closed account, NSF, wrong account number, etc.

Third Party Processor:

Any processor that participates in a relationship within the ACH payments flow (i.e., correspondent institutions, sending-point processors, or payroll processors).

Truncation:

Stopping a paper check at the point-of-sale or in a lockbox and turning the paper check into an electronic item.